We have a Budget… Early

We appear to have a budget. This is usually the report that we are giving you in late July or August. We have usually passed a number of continuing resolutions to keep the operations of the State moving past the end of the fiscal year on June 30th. Not this year.

On Thursday, the NC Senate passed their version of the budget (HB 200) with a vote along party lines. While the debate and vote are reminiscent of other years, the timing and the expected outcome today are far from ordinary. The major difference is that the Senate version is a much more carefully negotiated version than in previous years. Each provision has been cleared with their House counterparts as well as five key Democrat votes. The House is scheduled to vote to concur with the Senate version today and a final vote to adopt is scheduled for tonight just after midnight, the beginning of a new session day.

Lawmakers have reached this consensus by working out differences before going into the traditional conference process. If all goes according to plan, the Governor will have the proposal this weekend. She has just 10 days to decide whether to approve or veto the General Assembly proposal.

This proposal is not dramatically different from the one that the Governor proposed just a few short months ago. Total spending is reduced, but by less than 1% from the Governor’s original target. Lawmakers have made significant cuts across the board, but most notably in education and health and human services. This is to be expected since those two areas of the budget account for over 60% of total state spending.

Savings targets in health and human services will reduce spending by more than $500 million during the next budget cycle. Medicaid rate cuts, from which physicians are exempted, have been getting the most attention. But physicians are still responsible for delivering on the largest savings target to be achieved in this final budget. Community Care of NC (CCNC) is tasked with saving an additional $90 million in each of the two years of the budget. This savings is expected to be achieved through physician-driven care coordination and management of the aged, blind and disabled population.

CCNC was created by the physician community over a decade ago to do exactly what it has been tasked with accomplishing in this budget. Each year, CCNC has delivered more savings to Medicaid as more physicians participate and more Medicaid patients have been enrolled into the program.

This budget provides a much-needed respite from rate cuts for the physicians caring for our most needy population after two years of dramatic rate cuts, but it still relies heavily upon the physician community contributing to the achievement of the targeted savings. If not, a 2 percent physician rate cut is still possible mid-year.

Here is a quick look at highlights of the HHS budget.

CCNC savings will total $90 million each year in Medicaid and an additional $4 million in Health Choice through enhanced care coordination efforts with other Medicaid health care providers.

Mental Health reductions total just over $50 million. Most of this goal is to be accomplished through the reduction of community support funds and a swap with already available fund balances.

Medicaid providers paid on a cost settled basis will not receive inflationary increases totaling nearly $63 million in savings in the first year.

Medicaid provider rate cuts will save an additional $46 million through a 2% rate cut for all providers, except for physician services.

Health and Wellness Trust Fund will transfer $32 million through undesignated dollars.

Pharmacy services and dispensing rates will contribute an additional $25 million in savings.

Enhanced fraud and abuse programs are expected to bring in more than $19 million in savings in the first year and $28 million in the second year.

$16 million in savings will come through reductions to certain optional services including optical, durable medical supplies, specialized therapies, home therapies and dental.

$5 million will be reduced from contributions to nonprofits by the Department.